QBE 2004 Operating Profit up 43% to $645 Million

February 25, 2005

Australia’s QBE Insurance Group announced a record operating profit after tax of A$820 million (U.S. $645 million) for the year ended Dec. 31, 2004, up 43 percent on the profit of A$572 million (U.S.$450 million) last year. Pre tax profit was up 41 percent to A$1.08 billion (U.S. $850 million), while fully diluted earnings per share increased 35 percent to A104.5 cents (82.283 U.S. cents) and the return on average shareholders’ funds was 21.2 percent compared with 18.3 percent in 2003.

The company’s bulletin noted: “Insurance profit before tax increased 45 percent to A$908 million [U.S. $715 million], despite net claims from large catastrophes of A$320 million [U.S. $260 million] compared with A$27 million [U.S. $21.26 million] in 2003. Insurance profit to net earned premium was 13.4 percent compared with 10.4 percent. Cash flow from operations was again strong at A$2.11 billion [U.S. $1.66 billion] compared with A$2.089 billion [U.S.$1.645 billion]. Gross earned premium was up 10 percent to A$8.571 billion [U.S. $6.75 billion] and net earned premium increased 12 percent to A$6.781 billion [U.S.$5.34 billion].

“The impact of the stronger Australian dollar on premium growth was significant. Using 2003 rates of exchange, gross and net earned premium would have increased 16 percent and 17 percent respectively.” As a result of the strong operating performance QBE’s directors voted to increase the company’s final 2004 dividend by 36 percent.”

CEO Frank O’Halloran commented: “We have exceeded our main financial targets for 2004, achieving a record operating profit, improving underwriting profits and insurance margins in all our insurance divisions and outperforming our overall investment benchmarks with a low risk investment strategy.”

QBE has upgraded its expectations for the insurance profit margin for 2005 from the previously announced range of 12 to 13 percent to 12.5% to 13.5 percent of net earned premium.

“Acquisition activity during 2004 added over A$1.5 billion [U.S.$1.18 billion] in annualised gross premium, of which A$700 million [U.S. $551 million] was written in 2004,” O’Halloran continued. “This underpins the Group’s 2005 growth targets of a 10 percent increase in gross written premium to A$9.6 billion [U.S.$7.56 billion] and a 12.5 percent increase in net earned premium to A$7.6 billion [U.S.$5.98 billion]. Even though overall premium rates were slightly less than our expectations for the major renewal season of 1 January 2005, the quality and diversification of our insurance businesses around the world and the strength of our liabilities for outstanding claims and unearned premiums give us confidence that, subject to the usual caveats, we can increase our profit after tax by more than 10 percent in 2005.”

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